Euro equals the dollar: how does it influence Chilean fruit exports?
At the beginning of 2015, and in order to reactivate the local economy and avoid an imminent deflation, the European Central Bank depreciated its currency at historical values. Today, in the third month of the year, the euro equals the US currency, wreaking havoc on national fruit exports.
Since mid-2014 that the president of the European Central Bank (ECB), Mario Draghi, has announced strong economic measures for the Eurozone with the aim that, once and for all, the weak activity in the region will recover.
Thus, first, the ECB lowered interest rates to the historical minimum of 0,05% by the beginning of September; Then in October, the entity outlined its plan to try to introduce more money into the economy through the purchase of bank assets. Everything, with the main objective of causing banks to offer more credit to businesses and consumers so that this new money that arrives directly to the market reactivates the economy.
However, as the experts say, these measures caused a closed euro to fall, until reaching, today, a value of 0,919 compared to 1 dollar, a situation that did not happen since the 2002 year.
"Europe presents high risks of having deflation, for which a measure to stop it is depreciating the currency, in this case the euro. The euro projections are bearish in the long term, so far it has lost more than one 20% in one year, and today the European Central Bank will continue to depreciate the currency, due to the effect of the QE or purchase of bonds to inject liquidity into the market", Explains the specialist in analysis of currencies and economy, Alexis Osses.
"This phenomenon of unconventional intervention is the same that has taken the United Kingdom, Japan and the United States. The injection of liquidity by the Central Bank will bring about a greater depreciation of the euro and we think that if the inflation problems are accentuated and if the dollar gains strength in the long term, it could reach 0.86 dollars per euro", Adds Osses.
Within the context, this crisis has accentuated the debate that has always existed about the disparity in the economic situation of the countries that are part of the euro zone. Germany, for example, which has better withstood the turbulence of recent years, has always defended austerity and internal reforms as the way forward, and has positioned itself against the ECB taking aggressive measures to stimulate growth.
Is the decreasing value of the euro a problem for Europe? Not at the beginning. The economic forecasts have been adjusted upwards because a cheaper euro is good for export. Eurozone products will be relatively cheaper for non-euro consumers, which gives European companies a competitive advantage, which in turn could have positive consequences for European exporters.
"Europe could benefit from the fall of its currency, since a depreciation of this benefits the exporters in Europe who lost competitiveness with Japan - which follows the same plan to generate inflation- ", says the expert.
How does this situation affect the Chilean economic scenario, especially fruit production? This is what we try to answer next.
Chile and its fruit exports to Europe
The situation is not a very encouraging scenario for fruit exports that Chile makes with Europe. Perhaps now, a few months from the conjuncture, domestic exporters do not notice any real negative consequences in their businesses, however, the news foresees significant losses in the long term -and to a greater extent-, in the export of stones, grapes, apples and kiwis
The director of Fedefruta and producer / exporter, Cristián Allendes, comments on this: "The euro compared to last season is approximately 18% lower than the dollar, this is very important because for example, a box that came last year to the producer to U $ 6, this year, selling at the same price, It will reach U $ 4.92. Who are most affected? All the producers that export to Europe. In general, Chile exports around 30% of the volume of fruit to Europe and obviously we will see less income due to this effect of a lower euro".
Osses adds to the global scenario: "Although local losses are already projected for the exchange rate in industries such as wine, it also strongly affects all those national exporters that receive their payments in euros.".
"The Chilean automotive sector has still linked its prices in the majority to the dollar, which is why we do not see such a strong direct effect due to the fall of the euro, but European products that we import, such as air conditioners, have fallen in price due to the depreciation of the euro. On the other hand, the sector of tourism to Europe is also benefited by the fall in the euro, this is how the latest tourism figures show an increase of 5% only in Madrid, taking into account that tourism worldwide has fallen . At the moment that the euro costs us less than the dollar, possibly the direction of the national tourists will be towards Europe again"Said Osses.
However, there are those who point out that the European situation will not be absolutely negative for the fruit export market; in the long run there are exits and a history of many years of experience in the business.
"The exporters of Chilean fruit are already very diversified, both in varieties, as in types of fruit and market. While there may be a reduction in total shipments to Europe, some will remain in that market accepting a lower price and the rest may be diverted to other markets or may be sold locally. In return, the United States It has re-emerged as a very powerful market, which makes it a medium-term alternative for many exporters / producers that are currently more oriented to Europe."Says Ronald Bown, president of ASOEX.
The Chilean fruit and the possible outputs
Undoubtedly, the fall of the euro has altered the commercial landscape of Chilean fruit in Europe, but there are certain important points that will keep it going.
"In the last time we have perceived a kind of precaution in the orders, since before there were few orders with high volume and today more orders are made with less volume. In addition, we have begun to perceive a higher level of competition from the countries of Eastern Europe. Along with the above, new consumer trends are being added to the set of purchasing decisions of Europeans, as a preference for local fruit - although not premium quality - and preference for products with lower carbon footprint", Bown details.
"However, the Chilean fruit continues to be valued for its price / quality ratio, for its adaptation to European tastes - size, color, texture - and for its high reliability, acquired in years of commercial relationship"Adds Bown.
And the solutions to face the problem? There is talk among exporters to improve quality to get better prices, lower volumes a little, but never leave these markets because just as today the euro fell, tomorrow things can change and return to normal.
"We can do little about the devaluations of currencies in the destination countries of our fruit. That is a fact that we can not alter. ASOEX -in principle- does not get involved in commercial issues of the exporters. But we will continue doing our work in the promotion of exports of Chilean fruit, aimed at positioning Chile as a reliable supplier of fresh fruit in the world, contribute to strengthening the image of the sector and promote our good agricultural practices", Ends Bown.
Source: Fruit Portal
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